Good day, welcome to the Metro Performance Glass half-year results announcement. Today's call is being recorded. At this time, I'd like to turn the call over to Simon Mander. Please go ahead.
Thank you. Good morning, everyone. Welcome, and thank you for joining our call today. My name's Simon Mander, and I'm the CEO of Metro Performance Glass. With me is Brent Mealings, our CFO. This morning, we'll provide you with an overview of the group's results for the six months to 30th of September 2020, and then we'll be happy to take any questions. Moving on to slide two, we've noted four key messages which summarize the half. I'd like to start by recognizing the strength and dedication of our people right across the Metro Glass Group. The emergence of the COVID-19 pandemic has presented significant challenges for our teams, and their resilience has ensured that we've continued to deliver our market-leading products and services to our customers.
We had a solid first half in New Zealand, although the COVID-19 shutdown impacts at the start of the financial year overshadowed underlying performance. Australian Glass Group progressed well on the turnaround plan, with good operational performance and pleasingly delivered an EBIT positive result for the first half. Finally, as a group, Metro Glass has continued to significantly reduce its bank debt through strong operating cash flows and targeted capital expenditure. Turning now to slide three, we outlined some of the COVID-19 related issues we have faced over the first six months of FY 2021. Sitting here in November, it's vastly different to how we started the financial year, with our New Zealand-based operations closed from late March to the end of April, as we covered in some detail at the ASM in August.
We committed early to paying 100% of our staff's contracted wages and salaries for the five-week period of alert level four. We were very focused on supporting our customers as much as possible. For example, with emergency glazing work and regular communications. We controlled our costs across the group with discretionary costs and capital expenditure down materially. In Australia, restrictions have generally been less onerous, and we've been able to operate relatively normally throughout this calendar year. On slide four, we present our key financial results for the year. Our group results were primarily impacted by the shutdown and subsequent ramped-up period in New Zealand, both pleasingly partially offset by the improved performance in Australia. New Zealand revenue of NZD 89.2 million was down 19% versus the previous comparable period, with an EBIT before significant items of NZD 12.8 million down 26%.
Trading volumes from June onwards were largely in line with the prior year. This could not offset the impacts from the alert level four lockdown, with no revenue in April and significantly reduced revenue in May. Australian Glass Group's revenue grew by 3% to NZD 27.8 million. The big turnaround was at the EBIT level, where a NZD 2.3 million loss in the prior comparable period improved to a NZD 0.4 million EBIT profit this half. Our Australian manufacturing plants have remained operational throughout the first half, with the business now delivering strong and consistent operational performance that has been recognized by the market. Group EBIT of NZD 12.8 million includes the New Zealand and Australian segmental results, as well as group costs of NZD 0.4 million. You will find further information on this in note two of the financial statements.
We have continued to strengthen our balance sheet, with net bank debt declining by NZD 25.7 million year-on-year to NZD 47.7 million. This was supported by a NZD 4.6 million reduction of working capital, the sale and leaseback of two-thirds of our vehicle fleet, and a reduction in capital expenditure. We remain committed to reducing the company's leverage ratio to below one and a half times net debt to EBITDA on a pre-IFRS 16 basis. We are pleased with the progress being made. Once this is achieved on a sustainable basis, the board will consider the resumption of dividends to shareholders. As you can see on slide five, on a nine-month lag basis, new residential consents grew 8.1% between March 2020 and September 2020, reflecting strong consent activity in the second half of the 2019 calendar year.
Since the start of this year, despite the onset of COVID-19, consents have continued to track at a fairly consistent level. Total floor area consented has increased 3.9% in the same period. The mix of consent continues to shift towards multi-residential dwellings, with detached housing consents growing 3.9% on a nine-month lag basis, compared with 14.9% in multi-residential. Non-residential has declined 7.6% in the 12 months to September 2020 compared with the prior year. Pleasingly, Metro Glass commercial glazing forward books have increased 29% over the same period, in part due to the shutdown period, but also reflects our improved operational performance and acceptance rates. Turning now to slide six. In New Zealand, Metro Glass has responded well to numerous challenges this year with significant levels of demand uncertainty and volatility, supply chain disruptions, operating restrictions, and increased levels of competition.
While Metro Glass were able to ramp up sales to similar levels to last year from June onwards and the receipt of the New Zealand Government wage subsidy, this was not enough to offset the impacts from the alert level four lockdown. We remain firmly focused on our customers and our people, making good progress with both. I'm particularly proud of our apprenticeship scheme, in which we now have more than 80 apprentices enrolled. Looking at slide seven briefly, the Australian Glass Group is primarily involved in the new detached houses and alterations and additional segments in our key southeastern Australian markets. Following 18- 24 months of declines, housing approvals have begun to flatten and increase, and we look forward to these intentions flowing through to activity and glass demand.
On slide eight, in Australia, we continue to see the demand for double glazing increasing, with our sales increasing by 18% versus the same period last year in this segment. This increase in penetration has been supported by regulatory changes introduced in June 2019 for new commercial buildings, as well as the planned changes to be introduced in 2022/23 for residential. Overall, AGG's revenue grew 3% year-on-year, inclusive of a decline in sales of other glass products following the restructure of our New South Wales business in December 2019. AGG delivered a positive EBIT for the first half of the FY21, and we believe that the business is on a strong footing with a positive long-term outlook. I'll now hand over to Brent to discuss the financial results in more detail.
Thanks, Simon. Good morning, everyone. On slide nine, we break our revenue down in New Zealand. You can see that commercial glazing sales declined by 21% to NZD 18 million, and the residential segment declined 21% to NZD 59.1 million. These declines were primarily driven by the shutdown period and increased competition in our residential segments. Retrofit revenue grew 2% despite the shutdown period, with an increase in inquiry levels as our customers elected to invest and upgrade their properties. Slide 10 reflects our half-year results. I'll draw you to the segmental results on the right-hand side of the page. The impact on New Zealand's gross profit margin was driven by the reduced revenue in April and May, with gross profit margin from June onwards largely in line with the prior year.
In Australia, gross profit margin increased to 26.3%, benefiting from the restructure of the New South Wales business in December 2019. Turning to the group results on the left-hand side, net profit declined by 2% overall to NZD 7.6 million in the six months, benefiting from a NZD 1 million one-off gain on sale relating to the lease of the vehicle fleet. I'd like to now move on to the waterfall slide 11. Movements in New Zealand's EBIT results are shown in the gray-shading area, where you'll see we've tried to dimension the impacts of the shutdown period.
Our New Zealand EBIT result in April was NZD 8.8 million lower than the prior period as a result of the shutdown, albeit partially offset by the New Zealand Government wage subsidy. The following two red bars are mainly as a result of the May ramp-up period, where revenue was 25% below the prior year.
We've been very focused on our cost base and achieved some material cost savings year on year in distribution and glazing and administration, sales, and marketing expenses during the period. Turning to the Australian performance, which is in the green shaded area of the waterfall. The big story here is the gross profit margin improvement and reduction in administration expenses, which primarily arose as a result of the restructure of our New South Wales business. Turning to the balance sheet on page 12. The group achieved significant reductions in working capital, down NZD 4.6 million compared to the prior period. This was achieved through close management of our trade debtors and inventory in both New Zealand and Australia.
We do expect some of the inventory working capital savings to unwind in H2, as we are now in the process of increasing our safety stock levels to help manage the international shipping disruptions. Pleasingly, net bank debt decreased by NZD 25.7 million year-on-year, supported by strong operating cash flows, reduced working capital and targeted capital expenditure, and the sale and leaseback of two-thirds of our vehicle fleet. Our accounts now reflect NZD 3.3 million of non-bank debt borrowings, which primarily relates to the IFRS 16 accounting treatment of the sale and leaseback transaction. Net debt to EBITDA is now 1.53 times, as at the end of September. Also note the restatement of our 31 March 2020 financial statements to reflect a historic NZD 1.4 million annual leave provision error arising from the implementation of a new payroll system in September 2019.
We've provided details of this under Note nine of the interim statements. While disappointing, this had no cash impact and no impact on payments or entitlements of our staff. Slide 13 demonstrates our continued commitment to net bank debt reduction. We think this has been an important achievement to date, which ensures the Group is well-placed to adapt and take opportunities in the future. I'll now pass back to Simon to pick up on the outlook for the second half.
Thanks, Brent. Turning to slide 14 and our outlook for the 2021 financial year. Reflecting the significant level of uncertainty the group is facing, we now anticipate providing guidance on expected results for FY21 alongside a trading update in February 2021. There are some comments we'd like to make. Firstly, consenting activity in New Zealand has been stronger than we had anticipated in recent months. There is some risk that building activity begins to soften early next year as a result of broader macroeconomic factors as well as local issues like extended border restrictions and further weakness in business confidence and labor markets. We've been pleased with the solid results in New Zealand in recent months. Our customers are typically citing good forward books of work through into the new calendar year.
The industry is currently experiencing significant disruptions and delays in international shipping, resulting from a surge in sea freight demand and backlogs at key ports. We're monitoring this situation closely and are increasing our safety stock levels as appropriate. We are anticipating an increase in shipping-related costs in the second half. These factors will impact the level of net debt reduction achieved by the end of the financial year. In Australia, we remain confident that the improvements in Australian Glass Group's EBIT results achieved in the first half will be sustained through FY 2021, though weighted towards the first half given the Christmas and New Year shutdown period. These comments also assume no material change to the prevalence of COVID-19 or related restrictions.
Metro Glass' strategy and focus remain unchanged as we continue to build resilience and defend our leadership position, sustain a positive trajectory in Australia and benefit from growing demand for double glazing there, and prioritizing debt reduction to provide increased optionality for the future. That brings us to the end of our presentation. We're now really happy to answer any questions that you may have. Thanks.
Thank you. If you would like to ask a question, you may signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on your phone line will indicate when your line is open, and we ask that you state your name when posing your question. Once again, star one for questions. We'll take our first question from?
Oh, good morning, Simon and Brent. It's Stephen Hudson here from Macquarie Securities. Just a couple of quick ones from me. I think you talked about the reduction in the New Zealand revenues arising as a result of a mix of competition and the lockdown. I just wondered if you could give us some idea perhaps of the split there, given one is sort of a recurring issue, I suppose, and one is not, hopefully. Secondly, you also talked about some cost savings that you believe have been made that will be enduring, particularly in New Zealand. I just wondered if you could contextualize those and give us some idea about what the nature of those cost savings are.
Yeah. It was a little bit hard to hear the start of the question. Can you just repeat the first part of the question around the revenue? It was a bit muffled, sorry.
Sorry about that. You were just talking about the revenue reduction in New Zealand being a mix of competitive issues as well as the lockdown. Can you give us a sort of a split there in terms of?
Yeah, look-
One impact over another?
I think if you just We show that the ASN, our April revenue was essentially zero in New Zealand, that's one-sixth of a half. In May, we were down 25%, just as production started, the supply chain started back up in the industry. If you have a look at that and do the math on that, you can see the impact there as we detail on slide nine. Commercial and residential both impacted about the same. It's overwhelmingly the reduction in revenue is heavily weighted to that April close and then the May start-up.
Cost.
On the cost side.
Cost side.
Yeah. I think it's fair to say there is a mixture of one-off impacts that you would just anticipate through a number of spend controls that we put in place post the April impact. Through May, we haven't differentiated, I guess, from a cost-based perspective as we have done in the slide with the waterfall. If you think about the admin side of it, we achieved a NZD 1.6 million year-on-year improvement or reduction. We're talking high level here, what we're thinking is that 0.6 of that, I'd suggest, would be what I would call one-off style impacts. We'd certainly be aiming to lock in NZD 1 million from that into our future business planning.
We also had within factory labor, which is partly why we're seeing our gross margin, gross profit hanging in there and being quite solid. We've had some quite good improvements in the wages efficiency area in the factory, so that's helped to support our margin delivery. We expect that is ongoing and locked in. Anything else particularly? I'm just trying to think now. Anything else on that that you're interested in or?
No. That's useful. I suppose, any indication that you've dropped off any sort of unprofitable shifts or I suppose you've given us an indication there that or to what extent marketing costs have come off, but are expected to come back on. I suppose we're just trying to work out what the non-recurring elements, both in the revenue and the cost line are. Any sort of help in that respect is useful.
Yep, that's fine. The other thing to keep in mind around the shift patterns is that we did do quite a bit of work at the back end of last calendar year as we led into the shutdown period in Highbrook here, but also in Christchurch. I would say that we have been very focused on how we optimize those shift patterns and it's good and we're obviously very pleased to see that we've seen the benefit of that coming through now.
Yeah. Useful. Thanks very much, Brent.
As a reminder, star one if you would like to ask a question. We'll take our next question from
Oh, hi. This is Grant Lowe from Jarden. Just a couple of quick questions for me. I am just wondering where we think that the Australian gross margins might be able to get to. Obviously as the business grows over there, we have seen some pleasing improvement there. Just wondering where that might get to in, say, the next 18 months or so? Just wonder for a bit of flavor around the forward order books for each of the divisions around how they might sort of compare to this time last year.
Just go back to your first question, Grant Lowe, in relation to Australia and the gross margin. Yeah, we'd be seeing those as volume grows there. We'd be seeing those margins lifting and improving. The real story in Australia is growing that volume through particularly our New South Wales plant and also through Australia and to a lesser extent, proportionately through Melbourne. They'll be lifting as that volume grows. That's the key there.
Yep.
Sorry, I didn't hear the second part of your question.
Oh, sorry. Yeah. Just on the gross margins. I'm wondering if you've got a view as to what sort of level those might be able to get to in the next 12 or 18 months? The second question was just around forward order books versus this time last year?
Look, to be honest, I think we haven't felt like our Australian business is operating at a point where we would be able to confidently say where we believe our margins should be operating at. It's still a trajectory of turnaround, and whilst we're very happy with the year-on-year improvement, which is obvious, we still think that there's more room to move and obviously we're on a trajectory for further growth and better profitability because it's still not where we want it to be. But I'm not sure that we've necessarily landed on where we think it should be at a sort of year-on-year basis when it would be sort of operating at a normal level.
Okay.
As to forward books, we have in our glazing side of the business that's got a strong forward order book. We mentioned a number earlier in here on how much up that is on last year. That's a good level of work ahead of us there. The same in our retrofit business. We've got a good level of work ahead of us there through into the new year. That's very pleasing. That side of the business is operating well just in reflecting the work we've been doing there about improving the customer service and standardization of how we operate there. On the window fabricator side, we have a mixed level of forward visibility there from the customer base, and it's a very diverse group. Some people only talk about four to six weeks out. Other people talk three to six months.
It's really variable. I think this time of year people are very focused on delivery through to the Christmas, New Year shutdown. There's work around in the new year, but there's always a bit of uncertainty in January as to how the industry will restart with that holiday period.
That's great. Thank you.
Once again, star one if you would like to ask a question. There are no additional questions in the queue at this time.
Okay. Thank you very much, everyone. Appreciate your time.
That concludes today's call. We appreciate your participation.